Sonder is one of those hotel brands which are much loved in the hotel sector for being innovative, ground-breaking disruptors and all that hopeful, soul-swelling stuff, but for whom the Kool Aid has proven warm and flat when exposed to the light of the real world.
This is not to blame the concept; the timing of of the IPO certainly didn’t help. But for all us Kool Aid drinkers observing the sector, we’re pleased that Sonder has, first of all, survived and second of all, served to illustrate points we like to make about the sector. You can be the judge of which takes priority, but let’s just say we’re happy all over.
Our main area of interest is in the word ‘licensing’. Usually, when brands are acquired by the larger stables, it’s about the money changing hands. Many brands are created solely to be flogged off to a Marriott or an Accor further down the line, it’s a standard gestation model. Where we don’t get so much action is in licensing, although as Sean O’Neill from Skift reminds us, the MGM deal was a foreshadowing of this direction for Marriott.
Licensing is something you see in consumer goods. It’s why Coca Cola from some parts of the world is more delicious and sugary than others. If you license a brand you’re not getting caught up in any legal issues it may be carrying, any rents, any of the gruesome bother there might be dragging along behind it. The horror of ownership is not yours – if the boiler breaks it’s not your problem.
Does this mark the move by hotel companies into acting like actual consumer brands? We’re excited that it just might be. It’s less fun for the entrepreneurs commissioning logos, but it just means a slightly different approach to an exit. Much as Marriott is not weighed down by stabby points under the iceberg, neither is Sonder. And if a brand is meant to be something which adds value, tacking Marriott’s onto Sonder did miracles for the latter’s share price when it was announced.
This brings us to point two: can a brand add value. Clearly, for Sonder, Marriott can. The group was quick to point this out, with a “Sonder believes that the strategic agreement with Marriott will enhance Sonder’s value proposition to real estate owners who can expect to realise the unique combination of Sonder’s product and Marriott’s distribution”.
This was proven immediately in its share price, as well as through the announcement from Sonder that an investor consortium and existing investors were happy to have agreed to “enhance its liquidity profile by approximately $146m”.
Would this happy enhancement have happened without the addition of the Marriott name to provide distribution? We can but guess, but it seems like the note of reassurance which brands are supposed to provide was a factor in getting them to reach down the back of the sofa.
Francis Davidson, co-founder & CEO, Sonder, said: “We’re delighted about our strategic agreement with Marriott. Benefitting from the extensive distribution, loyalty programme and sales capabilities of a global hospitality leader will help us to prioritise our core value drivers, including our unique guest experience, while unlocking significant opportunities for increased revenue and cost efficiency.”
And for Marriott, it helps deal with the ever-growing demand for long stay. Tim Grisius, global officer, M&A, business development & real estate, Marriott International, said: “Marriott has long believed in providing the right product at the right price point for all trip purposes and generations of travellers. With the planned addition of Sonder by Marriott Bonvoy, we will be able to provide guests seeking apartment-style urban accommodations with even more options in the Marriott Bonvoy portfolio.”
And now we watch. It will be up to brands to prove that they are, well, brands if they want to be licensed. For the large stables, that route to getting 100 or so flags suddenly looks a whole lot more affordable. A syrupy new era looms.